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October 27, 2005

NICB Gives Access to Hurricane Claims

Filed under: Diminished Value, Insurance — admin @ 12:09 pm

The National Insurance Crime Bureau (NICB) is providing access to its database to allow consumers to check a vehicle identification number (VIN) or hull identification number (HIN) for Katrina and Rita hurricane-related damage. Although free, consumer access is limited to discovering whether an identification number is associated with a hurricane-related claim. The information does not include the type or amount of damage — only that a claim is associated with that ID number.

The NICB’s agreement to provide access to consumers is significant and unprecedented. The NICB does not make its information publicly available; and unlike private commercial databases offering vehicle histories that glean most of their information from public sources, such as police reports and motor vehicle departments, the NICB’s data comes directly from the source — the insurers that pay the claims. This is information to which neither CarFax nor AutoCheck have direct, steady access, and both companies would drool to be able to offer consumers the type of information that the NICB has.

There are two major limitations with the information provided by the NICB: The first is that you will only find out if the VIN or HIN is associated with a claim. Consumers are not given access to the specifics of the claim, like the type of damage or the amount paid. This means that a car that had been scratched by tree branches and had to have its hood repainted will be flagged exactly the same way as a car that was completely submerged in water and raw sewage.

The second limitation is that not all entities that are members of the NICB have agreed to allow their claims information to be searched. However, a number of member insurance companies have agreed to allow the NICB to release their claims information in this limited way, and the ability to search just part of the NICB’s database is an enormous boon to consumers that they simply cannot get anywhere else.

The NICB members participating in this database are:

Allstate
GEICO
Liberty Mutual
Progressive
St. Paul Travelers
The Republic Group
CoPart
Insurance Auto Auctions
MetLife
Safeway Insurance of Louisiana
State Farm
USAA
Farmers Insurance
Imperial Fire & Casualty
Nationwide
Sentry
The Hartford

This is a great step in the direction of total disclosure (OK, transparency for you corporate speakers), and these insurers deserve praise for helping consumers protect themselves by releasing even a small part of their claims information.

So, if you want to get the best handle on whether a particular VIN is potentially a recent hurricane-flood car, motor on over to the NICB homepage to run that VIN against the holy grail of vehicle damage databases.

October 21, 2005

Justice for Sale?

Filed under: Automotive Industry, Case Law, Insurance — admin @ 12:17 am

“[L]et the suspect judge be removed and one who is not suspect substituted for him. . . . [I]t is a very fearful thing to litigate under a suspect justice and very often results in the saddest outcomes.”

Thus wrote Henry of Bracton in 1270 on the absolute necessity of an impartial judiciary for the success of the judicial system. John T. Noonan & Kenneth I. Winston, The Responsible Judge, 278-279 (1993), quoting Bracton, The Laws and Customs of England (1270).

Which brings us full circle to Avery v. State Farm.

“Under the ABA model code, there is no doubt the Judge had to recuse himself.”

Those were the words Monroe H. Freedman, Hofstra law professor and renowned expert on legal and judicial ethics, said to me when I interviewed him about the Avery v. State Farm Illinois Supreme Court decision, rendered August 18, 2005.

After four years of waiting, the Illinois high court finally ruled on the Avery appeal, but the decision came after a very expensive and hard-fought election for a vacant seat on the State’s Supreme Court. That election only served to add another element of controversy in an already controversial case.

Justice Lloyd Karmeier, the winner of that pivotal election, was heavily funded by State Farm, the defendant in the $1 Billion+ aftermarket parts case, according to documents Plaintiffs submitted to the court. Karmeier took his place on the bench after defeating rival Gordon Maag, ironically, the Judge authoring the underlying appellate decision upholding the jury verdict but reversing some of the trial court’s damage award. Karmeier’s ascension to the bench transpired only after oral arguments took place. Nonetheless, Karmeier rejected Plaintiffs’ request that he recuse himself, despite his extensive funding by State Farm, its employees, lawyers, friends, and associates, and he actively participated in the decision overturning and dismissing the Avery case.

As Professor Freedman clarified, under the June 2005 proposed ABA Model Code of Judicial Ethics, a judge has an obligation to recuse him/herself when the judge’s impartiality “might reasonably be questioned.” This is the standard used in the Federal Judicial Disqualification Statute, 28 U.S.C. § 455, and it is also the standard governing the conduct of judges in the Illinois Supreme Court Rules, Code of Judicial Conduct, Rule 63(C)(1). According to Freedman, this standard is self-executing and demands the automatic recusal of a judge on his/her own volition.

So what exactly does it mean to say a judge’s impartiality might reasonably be questioned? According to the bible on the subject, Freedman and coauthor Abbe Smith’s Understanding Lawyers’ Ethics, 243 (3rd Ed. 2004), “might” means a “tentative possibility.” In other words, it is the barest hint, a whisper or feather of suggestion that steals across one’s mind. A litigant in our system is entitled to the purest determination of his grievances, and those in whom we entrust this terrible obligation must be impeccable. A lofty standard of this type is the highest compliment we can pay to those who serve in our judiciary and a breach of the standard is the cruelest form of despotism to the millions who must live with the results.

Several U.S. Supreme Court decisions have addressed whether the Due Process Clause of The U.S. Constitution is violated when a potentially tainted judge participates in a decision. Most notably in Tumey v. Ohio, 273 U.S. 510, 532, 47 S.Ct. 437, 444 (1927), the Court found that a judge must recuse himself if there existed a “possible temptation . . . which might lead him not to hold the balance nice, clear, and true” or when the matter “might create an impression of possible bias.” Additionally, the opinions of Justices O’Connor and Ginsberg in Republican Party of Minnesota v. White, 536 U.S. 765, 12 S.Ct. 2528 (2002) demonstrate that a majority of the U.S. Supreme Court has grave concerns about whether any “elected judge subject to reelection can decide a controversial case without violating due process.” Freedman, 248.

There is little doubt that State Farm had a significant interest in: 1) Preventing Judge Maag from winning the open Illinois Supreme Court seat; and 2) heavily subsidizing a candidate who might demonstrate his gratitude by helping to make a monstrously expensive case just “go away”. Given the fact that Justice Karmeier did exactly that, after Plaintiffs legitimately asked him to recuse himself, rather speaks for itself.

“When lawyers and litigants appear to be buying influence with campaign contributions, the appearance of partiality goes beyond the highly publicized case, tainting any case in which money may have passed.” Freedman, 249, indirectly citing a Justice at Stake survey (indicating that 76% of registered voters believe campaign contributions influence judicial decisions).

After the Avery decision was announced, I spent weeks answering questions from reporters and industry participants about it. What I found most noteworthy and saddest was the overall lack of faith in the judicial system, the uniform belief that justice had been sold to the entity capable of paying the most. After all, what are a few millions when you are playing for over one billion? That is exactly the message Karmeier’s participation in the decision sent to the person on the street.

As I have said before, perhaps the most appalling thing about the Avery decision was the majority’s idiotic and ill-conceived analysis about why the matter should be dismissed outright. It is embarrassing to the entire legal community that there is not an ounce of scholarship in the decision, the arguments do not tie together, and the court never condescends to tell us what standard of review it uses for any portion of its analysis.

There appears to have been an overall attitude of flippancy with which the Illinois Supreme Court handled this case. It began with the Supreme Court’s initial denial of Plaintiffs’ motion requesting Justice Karmeier to recuse himself from participation in the decision; then the hurried rethinking of whether the whole court should be involved and shunting the final decision off on Karmeier alone; Justice Karmeier’s automatic refusal to recuse himself; and, ultimately, the Court’s bizarre analysis attempting to justify the decision to dismiss.

I have to resort to The X-Files’ slogan for Fox Mulder, “I want to believe.” If there is no faith in the judiciary, can we actually say we have a justice system? The integrity of the justice system is far more important than the Avery decision, but Avery serves to show how far adrift we really are. Justice Karmeier, you should have recused yourself. Take a look at the Illinois Code of Judicial Conduct. You had a duty to do so. After all, someone might reasonably believe that you were beholden to State Farm for your current position. In fact, more than one someone does.

October 19, 2005

ADESA Joins Auction ACCESS®

Filed under: Automotive Industry — admin @ 3:52 pm

ADESA Corp., one of the Big Three auto remarketing auction groups, announced that it will join the Auction ACCESS® network.

Auction ACCESS® is a program offered by AutoTec LLC and is used by Manheim Auto Auctions, the largest auto auction group in the world, to streamline dealer registration, auction entry, and issuance of bidder badges for dealers attending auctions. AutoTec claims that, “Once the dealer has provided the registration information to an Auction ACCESS® subscribing auction, registering at additional auctions is as easy as swiping a card.” Well, not quite.

Dealers still have to fill out a lot of paperwork at individual auctions even if they are already registered in the Auction ACCESS® system. Each auction insists that dealers sign the power-of-attorney form enabling that auction to orchestrate paperwork for sale and title transfers. They also want to ensure that dealers have signed off acknowledging receipt of the individual auction’s rules and arbitration policies, and they all want to know where the bank accounts are in the event of trouble.

Like anything else, the Auction ACCESS® system has its good and bad points. Yes, it helps simplify the registration process and the ease of obtaining a bidder badge for daily auctions; however, it can also mean a significant loss of autonomy for dealers. Now, if a single auction in the Auction ACCESS® system has a problem (real or imagined) with a dealer, the auction only has to contact Auction ACCESS to block the dealer’s entry to its auction — and to all the other auctions in the system as well.

With 85% of cars sold at affiliated National Auto Auction Association’s sales, dealers who are black-listed through Auction ACCESS are effectively out of business.

HT Autoremarketing

October 18, 2005

Dump Truck Diminished Value Sought

Filed under: Diminished Value, Insurance — admin @ 11:36 am

Young Trucking, a commerical company, is suing two Indiana University Students for the diminished value caused to its dump truck as a result of an accident allegedly caused by the students.

Diminished Value: Not just for the little guy.

TheIndyChannel.com - News - Company Sues Students After Car Wreck

October 17, 2005

BMW Films Puts “The Hire” to Bed

Filed under: Automotive Industry — admin @ 2:19 pm

BMW has announced that it will close down the series of short films called “The Hire”. With a set format featuring Clive Owen as the enigmatic, taciturn, monochromatic driver of a hired BMW (what else?), BMW Films recruited top directors to create their own vignettes. The result was nothing short of inspiring.

Personally, I find Hollywood’s love-affair with the car chase scene beyond boring and doubted I could sit through a number of short films certain to be full of the spin, the chase, the squealing brakes, the jumping over a rising drawbridge, you know the deal. But The Hire surprised me by the ingenuity of the directors to comply with the obvious goal of showing off various types of BMWs and their abilities without devolving into a Dukes of Hazzard predictable car yawner. No, The Hire vignettes are deep, incisive, often intense, and occasionally downright disturbing.

Now, the company is letting Mr. Owen hang up his driving gloves, but you can still get a copy of this impressive array of shorts — free if you own or lease a BMW, $3.75 for shipping and handling if you don’t.

Bmwfilms : DVD Order

October 12, 2005

Lack of Maintenance Logs Causes Aircraft Diminished Value

Filed under: Diminished Value, Insurance — admin @ 6:50 pm

Tom Chappell, a thirty year veteran of the insurance and risk management industry warns that failing to maintain aircraft maintenance logs can diminish the value of your plane by 20%. And that’s just for failing to keep adequate maintenance logs, not for damage.

Here is a snipped of what he said on the topic from The Unappreciated & Ill-Defined Aircraft Maintenance Log which appeared at the AVweb on October 9, 2005:

    A reconstructed set of maintenance logs that are properly documented may satisfy the
    FAA but does it satisfy that potential aircraft buyer to whom you may sell your aircraft?
    The true loss is in market value or market acceptance. Diminution of value is just as real
    with incomplete logs as it is in an aircraft with damage history. After all, why should a
    potential aircraft buyer pay you an average retail price for your aircraft with missing or
    reconstructed maintenance logs or damage history if he can buy another aircraft that is
    clean and complete? So a discount is expected. How much? It depends upon the age,
    value, make, model, and availability of the aircraft. If the market is saturated with like
    aircraft, you may have to discount your aircraft drastically in order to make it attractive
    to a buyer. So the 20% diminution of value estimated by my dealer friends may be very
    thin.

I appreciate the statement from an insurance professional with decades of experience that the concept of diminished value is real and quantifiable. Of course it is. Anyone given the purchase option between two identical pieces of chattel (except for the prior damage of one) at the same price is NOT going to choose the damaged one. The only way to make the previously damaged product attractive to a buyer is to offer a substantial discount off the retail price of a good one.

The quoted article first appeared in Aviation Insurance & Risk Management, Summer 2005

October 3, 2005

Third Parties Get Diminished Value – No Matter Where You Live

Filed under: Diminished Value, Insurance — admin @ 12:57 pm

Contrary to what MSN.com splashed over its front page last Saturday (which was a reprint of a 2003 article from Bankrate.com), your right to recover “diminished value” does not necessarily depend on where you live. That may be true when you are trying to recover diminished value from your own insurance company as the “at-fault” driver, but it is not true when you are claiming diminished value as the innocent party.

“Diminished value” is the term given to the automatic decrease in value caused to your vehicle by virtue of the fact that it has been involved in an accident – no matter how perfectly it has been repaired. This is often referred to as “inherent diminished value,” because it is not remedial. That is, nothing can make it go away. There are other things that can contribute additionally to increase the automatic diminished value suffered by a collision. Those things can be a poor repair performed by the body shop and/or an insurer’s refusal to pay for a complete repair or required use of generic parts. Both of these later varieties do not automatically occur and are potentially remedial. As a result, the diminished value most often discussed is inherent diminished value.

Just the facts, Ma’am

What has your state of residency got to do with whether you can recover diminished value? Well, if yours was the vehicle that was struck (not at-fault for the collision) absolutely nothing. As the innocent party, you are entitled to be “made whole,” which means putting you back in the position you were in immediately before the accident – and, of course, includes giving you back the total value of your vehicle. Simply paying for the repair can almost never do that.

As the innocent party, you are typically referred to as a “third party” when the other driver’s insurance company is involved. When you are claiming against your own insurance policy, you are a “first party.” A third party’s right to claim diminished value stems from a legal theory of negligence. A first party’s right, if any, to claim diminished value stems from a legal theory of contract. And these distinctions are significant.

Here’s the thing: If someone rear-ends your car, the at-fault driver’s insurer may step in and tell you to have your car fixed. But the insurer does not have the right to dictate the terms of the repair or to limit your recovery. In fact, the insurer is not really involved in the situation, and this is why. If you were to file a lawsuit to recover for the entire decrease in value of your vehicle – cost of repair, diminished value, etc. (and loss of use) – you would not name the at-fault driver’s insurance company, you would have to name the at-fault driver. That person’s insurance company has an obligation to pay (on behalf of its insured) for everything for which it’s insured/driver becomes liable, up to the policy limits.

Insurance representatives frequently fail to make any distinctions between what is owed to the insured and what is owed (on behalf of the insured) to a third party. Third parties are entitled to be made whole. The insured is only entitled to what the insurance contract provides – which in some states has been interpreted as the cost to repair or replace the vehicle, not to restore the value.

The bottom line is that if you are the at-fault driver trying to recover against your own insurer for the diminished value caused when you crashed into someone else, your ability to recover the diminished value is dictated by the insurance contract provided it is not violating the public policy of the state. Georgia allows first parties to recover diminished value even when you are the at-fault driver because the Georgia Supreme Court has decided that public policy dictates that auto insurance coverage insures value, not just a repair. Florida, Maine, and South Carolina, for example, take the opposite approach and do not require an insurer under an ordinary insurance policy to compensate at-fault drivers for the diminished value caused to vehicles.

But don’t be fooled. No state has said that you cannot recover diminished value if you are the innocent third party and any insurance claims representative or department of insurance telling you otherwise is WRONG.

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